News organizations struggle to make free news services pay

By Peter Preston / THE GUARDIAN , LONDON

Prophesying is easy.

“I confidently predict that, within 12 months, almost all news organizations will be charging for [online] content,” said Brendan Barber, the editor of the Financial Times, echoing Rupert Murdoch, who said much the same thing a few weeks ago.

Yes, Mr Barber, but can you be a touch more specific?

The FT oracle replies: “How these payment models work and how much revenue they can generate is still up in the air.”

And that’s the difficulty. The entire newspaper and magazine industry feels it is looking into a financial pit as advertising flakes away, chunks of it never to return. Somehow the zillions plowed into news Web sites have to start paying off sometime soon. There has to be light at the end of a very long, dark tunnel that threatens all seriously resourced news operations.

Yet here’s the ultimate rub.

“The question for consumers is the psychological barrier of paying now when you were getting it free before — and you’re bound to lose some readers as a result,” said Ken Doctor, a top Californian analyst.

The FT, which has always kept much of its specialized content behind paid firewalls, does not have that problem. Nor does Murdoch’s Wall Street Journal. Financial journalism online has an instant value that investors and punters are well prepared to pay for.

Five years or so ago, general interest papers that had hoped to make cash from digital charges decided that free content supported by loads of paid advertising was the way forward. So the charging stopped and gathering readers — or unique users — took over. The New York Times scrapped Times Select — with its 200,000 subscribers at US$50 a year — and let buoyantly increasing Web ads take the strain. But that has turned into a disaster as ad sales on its various sites have fall between 3.5 percent and 8 percent so far this year. No miracle growth — and no opportunity to push rates charged beyond 12 percent or 15 percent of their print equivalent. Advertising alone won’t hack it. Even Google’s own market rate is down 13 percent. So what on earth will?

The New York Times, because it has US$1.1 billion in debts to pay off, is being rather more heart-on-sleeve about next steps. It has asked a research sample of subscribers whether they would pay US$5 a month for access to NYtimes.com (and if not, whether US$2.50 a month sounds a better bet).

Scott Heekin-Canedy, its group general manager, reckons micropayments — the accumulation of tiny sums for time spent online — will not work.

He said he was looking at the metered model that the FT uses or a “membership model” that charges a monthly fee and offers “club privileges” — plus bargain opportunities to buy on top.

Well, we’ll see as soon as the newly thin New York Times board sings. But don’t expect one great answer to a myriad of different dilemmas. The Times, which invests so much in content, may be able to charge successfully for some or all of it. But its unique user count is bound to decline, taking online advertising down with it. If there was a widespread, concerted change, then perhaps it could be contrived without too much loss. But current monopoly law makes such an organized commercial shift impossible.

In the UK, where the giant hulk of the BBC’s £153 million (US$252 million) a year “free” Web site is the elephant in the room, the situation is even more complex.